Mercer CEO says aging population requires shared responsibility
Much more needs to be done to tackle the challenges of a rapidly aging population, and the responsibilities must be shared between governments, companies and individuals, consulting firm Mercer's president and chief executive officer told CNBC Thursday.
Julio Portalatin, speaking exclusively to CNBC's "Squawk Box," said efforts to compensate for an older population need to take into account that people are both living and working longer.
Populations are on course to get older quickly. Many countries, most notably Japan, are already dealing with a population pyramid with a narrow base of fewer young and thick middles of older people. That has consequences for the rest of the economy as the working age population shrinks.
The National Institute on Aging (NIA), part of the U.S. Department of Health and Human Services, said in a report issued near the end of March that 8.5 percent of the world's population today is aged 65 and over. That's about 617 million people. That number is projected to increase to 1.6 billion people worldwide by 2050.
But even as the need to create programs to care for the elderly becomes more pressing, Portalatin said governments must extend benefits for older workers in a "fiscally responsible" manner, noting that "the retirement age has to be dealt with. It is a sensitive issue but governments certainly have to approach that as a solution."
He added that companies could explore the option of setting aside a part of every employee's payroll from day one, by default, as a type of forced savings for the future. Employees would have to make "a conscious decision to opt out," said Portalatin, adding such plans would instill a sense of consciousness in people about planning for the future, and may lead to a higher percentage of salaries contributed to retirement savings.
Caring for an aging population is particularly pressing in Asia, with the NIA report noting that the speed of aging and the size of the older population is fastest there.
"While about half of the Asian countries currently have less than a 5 percent share for the older population, some countries in Asia are among the oldest in the world," the report said, adding East Asia is one of the oldest sub-regions globally. East Asia includes Japan, China, Singapore and Hong Kong.
In a December report, the World Bank said East Asia might lose as much as 15 percent of its working-age population by 2040, adding many countries in the sub-region are experiencing accelerated aging at relatively low levels of per capita income. That would include countries such as Thailand and Vietnam.
Portalatin acknowledged some governments in Asia are already stepping up with policies designed to tackle coping with an older population, citing Singapore as an example. The city-state has a mandatory retirement saving program called the Central Provident Fund (CPF), which requires contributions from both employees and employers monthly.
The country has also undertaken initiatives to make infrastructure such as roads, public transportation and walkways more senior-friendly.
"We have a Mercer pension global index ... [which] gives a lot of credit to Singapore, being one of the best Asian retirement systems and it continues to improve and continues to add things [to its senior-friendly policies]," Portalatin said.
In its 2016 budget announcement, the Singapore government introduced more measures to support those aged 65 and above.
A program called Silver Support will provide payouts to qualifying senior citizens starting in July to support the elderly population in the bottom 30 percent on income, most of whom have less retirement support.